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In the Market for Reserves,if the Federal Funds Rate Is

question 122

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In the market for reserves,if the federal funds rate is above the interest rate paid on excess reserves,an open market purchase ________ the supply of reserves and causes the federal funds interest rate to ________,everything else held constant.


Definitions:

Present Value

The equivalent current value of a future financial sum or stream of cash flows, factoring in a specified rate of return.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Price

The amount of money or consideration exchanged for the ownership or use of a good or service.

Business

An organization or enterprising entity engaged in commercial, industrial, or professional activities, often structured to produce and sell goods and services for profit.

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